Hunton Employment & Labor Perspectives

Employers breathed a collective sigh of relief in August 2017, when the Office of Management and Budget (OMB) announced it was staying the requirement that employers report W-2 wage information in the annual EEO-1 Report.   Now, though, the reprieve seems over.  On March 4, 2019, the District of Columbia Federal Court ruled that OMB improperly issued the stay without good cause, and put the wage report back into effect.  See National Women’s Law Center v OMB, No. 1:17-cv-2458 (D.D.C.  March 4, 2019).

The EEO-1 wage report has a tumultuous history.  The addition to the report was proposed in January 2016 during the Obama administration, and approved by the OMB.  Referred to as “Component 2” of the EEO-1, it would require employers to provide W-2 earnings for employees, along with hours worked.  The ostensible purpose of the wage data is to increase pay transparency and equal pay compliance.  However, the proposal met with immediate criticism from employers and business advocacy groups, like the Chamber of Commerce, the National Federation of Independent Business, and the Retail Industry Leaders Association (RILA). Employers were (and are) concerned about the way such data would be used, particularly since the pay data envisioned – W-2 wages by EEO-1 race and gender groups -- is too aggregated and generalized to be used for proper equity analyses.  This concern was also shared by those within the government, including Acting Chair of the EEOC, Victoria A. Lipnic.   Employers also argued that the EEOC and OMB had significantly underestimated the time and burden associated with providing the pay data.

In response to the heavy and well-reasoned criticisms, OMB issued a stay on the Component 2 data before the requirement went into effect.  A few months later, the National Women’s Law Center sued the OMB to revive the rule.  Judge Tana J. Chutkan issued a ruling in the plaintiff’s favor.

The Court’s ruling is a blow to employers.  But companies need not panic.  The government may appeal the ruling, or President Trump’s administration may take other steps to eliminate the “Component 2” wage data report.  Even if the requirement stays in place, it almost certainly will not take effect by the coming EEO-1 submission deadline, which is May 31, 2019 (after an extension due to the partial lapse in appropriations).  At minimum, the filing deadline would need to be extended again by several months.  Or, the EEOC may opt to delay implementation until 2020 or later.

The best course of action for employers is to monitor the situation closely and to urge the EEOC to withdraw or modify the wage data collection.